One of the makers of the Showyou app. That's Ilie Nastase btw. I'm camera shy for a reason.

The Next Television Platform, Part 2

This is the second part of a three part series of posts on how television is changing and where the opportunities are. You can read the first post here.

I don’t make pictures just to make money. I make money to make more pictures.— Walt Disney

I recently began re-watching The Wire and it got me thinking about how that show got created, and how much television changed in the quarter century before The Wire first aired.

A five season series about gang violence, drug dealing and the drug wars, the devastation wrought by heroin and crack, racism, underfunded and broken public schools, the decline of the newspaper business and longshoremen’s unions? On a channel you had to pay for, with no ads? Impossible to imagine in 1979.

As a teenager in 1979 in the United States of America, one of the ways to cauterize your boredom on a Saturday night was to turn on the TV. At 9pm, among the four channels on the air (five if you were lucky), your best options were The Love Boat orBJ and the Bear.

If you were making television in the 1970s, the only way to make any money was through advertising, and the only way to make a lot money was to get the biggest possible audience share. So programmers at ABC, CBS and NBC worked feverishly to engineer a programming lineup as broad as possible in its appeal, with shows designed to entertain everyone and offend no one (as my colleague Andy Forssell points out, there were exceptions like Hill Street Blues and Seinfeld — but they were exceptions, not the rule).

Cable and satellite systems changed television in two fundamental ways. First, they expanded the supply of programming, allowing people to get dozens of channels the four or five they were used to. For the first decade or so cable systems mostly offered “more” — more choices, more channels, more things to watch, more ways to kill time. The programming wasn’t necessarily better than what you got on broadcast TV, but there was more of it, and it was more precisely targeted to the tastes of specific constituencies — sports and news junkies, teens, history buffs, soap opera addicts.

The second thing cable did was even more important — it persuaded consumers to pay for something they previously got for free. That simple change took decades to play out, but had huge implications over time. With revenues no longer determined only, or even mostly, by audience size for your shows, cable networks began to think instead about how many people paid for their channel (indirectly through affiliate fees, or slightly more directly by adding it as an a la carte premium channel in the case of HBO), how much they paid, and how they could increase both of those things.

It became more important to get some people to love your channel than a lot of people to watch it. ESPN is not the most popular channel (it’s frequently not even in the top 10 in audience size per night or per week) but commands over $6 per subscriber per month from cable operators — the most of any cable network, roughly twice what cable operators pay for all of Viacom’s channels combined — because hard core, passionate sports fans love it, demand it, and wouldn’t buy cable without it.

Independence from advertising freed HBO from having to worry about audience size for any of its shows, and allowed it to take bold creative risks — “It’s not television, it’s HBO.” Starting in the early-1990s, HBO learned that it could set itself apart from other premium channels, who all had the same movies and comedy specials, by investing in original series. The Larry Sanders Show ushered in two-decades of great, ground-breaking original series and a legion of imitators.

The evolution from an ad-supported business model to paid models resulted in programming that more consistently achieved greatness. It’s too simplistic to say paid-platforms guarantee better TV — a claim immediately undercut by the junk you can easily find still on cable. But by divorcing revenues from audience size, paid platforms do a better job of creating the conditions that allow creators and publishers to make something really great, and something we love.

As Ben Thompson wrote on his blog a few years ago, we hire TV to do a specific job. It’s done different jobs over time, but today, in 2015, it does one job for most people most of the time — it entertains us, mainly on the evenings and weekends (Thompson puts it somewhat different, and says it “provides escapism.”) One reason linear television held on against the assault of all our digital devices for longer than many expected is because it did that job better than any other medium.

The biggest OTT video platforms — particularly Netflix and Amazon — are challenging the hegemony of linear TV because they now do that job better for many. They have shown they can make programming we love just as much as linear TV, with shows like House of Cards, Orange is the New Black, Transparent, Bojack Horseman, Unbreakable Kimmy Schmidt, Sneaky Pete. And they go one step further, making it all available on-demand, and viewable on any device the viewer has. The on-demand OTT world is so different that we’ve adopted a new verb to describe how we watch now — binge. And so the moat that cable and satellite channels erected is cracking.

There is another reason we’re attracted to paid-services like Netflix and Amazon — no ads.

We want the distractions and interruptions kept to a minimum and we’re far more willing to pay for that. In fact, we get into a near state of rage when we’re besieged with commercials while catching up on a favorite show:

And so today Hulu announced it would finally offer an ad-free version of its service at a higher price. I don’t have data to prove this claim, but I have a hunch that our desire for immersive, ad-free escapism in the evenings and weekends has grown as we spend more time in front of other screens, on the ad-supported Stream, during the other parts of the day.

We want to use our time differently when we hire a service like Netflix on our evenings off or the weekends. We’re looking for stuff to get lost in and to love. We come for more than relief form boredom; we’re seeking enlightenment, transcendence, the suspension of disbelief.

And so the next television platform — meaning the one that joins the ranks of Netflix and Amazon Instant and perhaps one day even surpasses those services in power and popularity — will almost certainly have pay in its DNA in addition to being most at home on the TV. Because consumers have hired TV to do a job (provide escapism), and ads get in the way of that. And because the platforms with pay in their DNA are the most likely to provide the kinds of programming we can get lost in, and binge on.